Questions of construction of contracts, assignment of building warranties and the limits of the principle - Walker Group Constructions Pty Ltd v Tzaneros Pty Ltd [2017] NSWCA 27

  • Author : Anthony Lo Surdo SC FCIArb - 17-03-2017

On 1 March 2017, the NSWCA (Bathurst CJ, Beazley P and Gleeson JA) delivered judgment in Walker Group Constructions Pty Ltd v Tzaneros Pty Ltd [2017] NSWCA 27.

The judgment considers questions of construction of contracts, assignment of building warranties, the limits of the principle in Allianz Australia Insurance Ltd v Waterbrook at Yowie Bay Pty Ltd, causation and betterment.

The Facts

The appellant, Walker Group Constructions Pty Ltd (WGC) was responsible for the design and construction of a container terminal at Port Botany (Terminal).

The Terminal was built in 2003 and 2004 on land owned by Sydney Ports Corporation, which, at the time, was leased to P&O Trans Australia Holdings Ltd (P&O). A contract for the design and construction of the terminal (Contractwas entered into between WGC and P&O. A subsidiary of WGC engaged the second respondent, AMT Engineers Pty Limited (AMT) to design the concrete pavement that formed part of the Terminal.

In 2004, P&O transferred its leasehold interest in the land to a subsidiary. In 2005, that entity transferred its leasehold interest to the first respondent Tzaneros. On the same day, P&O purported to assign by deed to Tzaneros the warranties given by WGC in connection with the construction of the terminal (Deed). WGC provided a letter of consent to the assignment.

The Contract provided for the construction of five warehouses and the laying of various types of pavement. Following the laying of the pavement, cracks and spalling began to develop in some pavement types. Tzaneros claimed from WGC and AMT the cost of replacing the defective pavement.    

The Issues

The issues raised by the notice of appeal included:

(1)   Whether on a proper construction of the terms of the Deed and the letter of consent from WGC, there was an assignment by P&O to Tzaneros of any accrued cause(s) of action for breach of the building warranties.

(2)   Whether construction of the relevant documents by reference to the surrounding circumstances was permissible.

(3)   Whether Tzaneros acquired the terminal with knowledge of the defects and therefore suffered no loss as a consequence of those defects.

(4)   Whether Tzaneros was entitled to recover damages for the cost of full replacement of the pavement.

(5)   Whether a reduction in the sum of damages awarded to Tzaneros for betterment should have been made.

The Findings

The Court held (Bathurst CJ, Beazley P and Gleeson JA agreeing), dismissing the appeal:

Construction

  • Recourse may be had to deleted words or clauses in a contract for the purpose of construing ambiguous language. The fact of the deletion of words can only be used to negative an inference sought to be drawn from the surrounding circumstances, where the evidence shows the parties mutually concurred in rejecting that meaning: [117]-[118] (Bathurst CJ); [241] (Beazley P); [242] (Gleeson JA) (Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; [1982] HCA 24; Gee Dee Nominees Pty Ltd v Ecosse Property Holdings Pty Ltd [2016] VSCA 23; 260 Oxford Street Pty Ltd v Premetis [2006] NSWCA 96; Burger King Corporation v Hungry Jack

About the Author

Anthony Lo Surdo SC FCIArb

Recent Posts

Anthony Lo Surdo SC FCIArb reappointed by the International Council of Arbitration for Sport

Anthony Lo Surdo SC FCIArb Date: 16-05-2023

Legal Professional Privilege - The Latest from the High Court of Australia

Anthony Lo Surdo SC FCIArb Date: 20-08-2019

Anthony Lo Surdo SC nominated for Mediator of the Year

Anthony Lo Surdo SC FCIArb Date: 03-08-2017

Is leave required to enforce an equitable charge against a bankrupt?

Anthony Lo Surdo SC FCIArb Date: 26-06-2017

David Kendirijian v Eugene Lepore & Anor [2017] HCA 13

Anthony Lo Surdo SC FCIArb Date: 22-04-2017